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Obuasi

In separate announcements issued today Randgold Resouces and AngloGold Ashanti have both stated that Randgold has decided not to proceed with the proposed joint venture to redevelop AngloGold’s Obuasi gold mine – the original Ashanti gold mine – in Ghana.

To recap, on 16 September this year, the two companies had announced their intention to form a joint venture to rebuild the mine, which still has a very substantial good grade gold resource, despite its 118 year mining history. However, the proposal to undertake this would be, subject among other things to the completion of satisfactory due diligence by Randgold and the agreement of a revised development plan.

Randgold comments that after undertaking its own due diligence exercise into the mine and the redevelopment opportunity the mine affords, and following the work undertaken on the revised development plan, the company has determined that the development plan will not satisfy its own internal investment requirements. Accordingly, Randgold has decided to terminate the investment agreement entered into with AngloGold Ashanti, with immediate effect.

Randgold and AngloGold have a good history of working together on gold mining projects – initially in Mali – and most recently in what appears to be the very successful building of the totally new Kibali mine in the DRC which is now probably the most productive gold mine in the whole of Africa. There is a strong synergy between the two companies but obviously this was not strong enough to overcome the Randgold ethos of only developing projects in which it sees a strong return, and obviously Obuasi, with some significant ongoing social and technical problems, did not meet Randgold’s investment criteria, which have meant it has consistently outperformed its peers among the major and mid tier gold miners globally.

Randgold Chief Executive Mark Bristow commented that Randgold remained committed to creating real value for all its stakeholders by continuing to invest substantially in its exploration programmes with their proven record of success as well as by investigating potential growth opportunities presented by the market.

AngloGold noted in its statement that it remains committed to continue with its Limited Operating Phaseat the mine designed to resurrectoperations there at a smaller scale and at lower cost

AngloGold goesd on to note that this decision follows concerted efforts by both companies to improve the project’s returns and also to secure an appropriate set of consents from the Government of Ghana, within an ambitious timeframe that would have allowed for a feasibility decision on the redevelopment of the mine in early 2016. Although improvements have been identified, these have not been sufficient to commit to a substantial investment under the prevailing conditions.

The Minister of Lands and Natural Resources of Ghana has approved continuation of Obuasi’s limited operating phase during Q1 2016. Limited operations will be undertaken at reduced cost, compared to 2015, including maintaining the operations, security, environmental management, optimising the feasibility study, as well as ongoing sustainability work.

“We have made a concerted effort to unlock a new opportunity for Obuasi, and the work we have done lays a good foundation for the operation in the long term,” AngloGold Ashanti Chief Executive Officer Srinivasan Venkatakrishnan said. “But in the current environment, we believe it is prudent to conserve our resources and to revisit this opportunity when market conditions improve.”